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New Apple CEO Begins With Rare Stumble for Company

There's plenty to be excited about over the short-term for Apple investors. As the company noted in its presentation Tuesday, the Mac computer continues to take market share, penetration of the company's products is very low internationally, and Apple continues to sell tons of devices. On a valuation basis, Apple is an attractive growth stock with a forward price-to-earnings ratio of only 11, a big discount to the broader market before Apple's massive cash position is stripped out.

Over the long term, though, there should be worry that Apple can continue its dominance over the competition. While the iPad doesn't look to have a viable competitor yet, pending the release of
Amazon's(AMZN - Get Report) new Kindle Fire, Apple now appears to have left the door open to competition for the iPhone.

In a research note released Wednesday, JMP Securities analyst Alex Gauna called the iPhone 4S an "incremental improvement" over the iPhone 4, but noted concerns of increasing competition for Apple in the mobile handset market. Gauna has a market perform rating on Apple shares.

"We couldn't help but come away with the impression that the advances, launch forum and presentations lacked much of the panache seen in the past," Gauna wrote in the research note. "This could heighten investor anxieties around how the company will operate without visionary leader Steve Jobs at the helm as well as leave the door open for Android to continue gaining worldwide market share at a faster pace."

Smith notes that, historically in the technology cycle, competition should be able to replicate and catch up. The iPhone has been dominant in the smartphone market since it was originally launched in 2007, but nearly every phone now is capable of much of what the iPhone offers. Some of these newer handsets with
Google's(GOOG - Get Report) Android platform operate on 4G networks with faster speeds, which frustrates buyers who were hoping for an iPhone 5 announcement.

"If the technological advantages of the iPhone start to diminish, that would be a point of concern for us," Smith says. "It will happen. It's inevitable. You can't keep coming to market and blowing away consumers. When we see signs of that, stocks historically stall out. The same thing will happen to Apple. We realize that. It's a matter of how long they can ride the horse."

In other words, Smith says, now is not the time for Apple investors to panic. "The setup looks good for the next three or four months," he says. "We're looking at a holiday season when the competition hasn't shown up. They'll continue to take market share. It's not that Steve Jobs has left and people around Apple are just twiddling their thumbs."

Next year, though, has gotten cloudier after yesterday's dud of a presentation. "Next year, you have to be more objective and see what the competition is doing," Smith says. "There's a possibility that the technological advantage will diminish somewhat and you might want to pull back on your weightings."